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You don’t profit in a monopoly, you work harder: A lesson from Apple
- wccrawford 15y ago"Every high school pass out knows this equation. To maximize profit, you can either maximize the profit per device sold or you can maximize the number of devices sold. Profit has the tendency to stay constant. If you reduce the profit per device, the number of devices sold will increase." What? NO! You maximize profit by finding out where supply and demand meet to find the point where profit and units sold turn out the maximum profit. And the rest of the article has little to do with maximizing profit and every thing to do with gaining market share.
- paramaggarwal 15y agoI was trying to point out the balancing act between profit and quantity in my article. But your point is perfect. I missed it. Thanks.
- kenjackson 15y agoBad article. Gets a lot of stuff wrong or omits key facts, such as Apple's almost immediate huge price reduction on the iPhone. Or the subsidy model used on ATT. Without taking these things into effect, you can't do a reasonable analysis of what Apple did.
- snikolic 15y agoPremise: Traditional economics is pricing things low when entering a market, and pricing things high in a captured market (a monopoly). Argument: Apple does the opposite of this. e.g. Apple entered a new market with the iPhone, but priced high. Apple had a tablet monopoly with the iPad, but priced low. Conclusion: Worship Steve Jobs as he upsets traditional economics. Fallacy #1: The iPhone was not an entrance to a new market; PDAs, mp3 players, handheld internet, and cell phones had already began to converge into a single market, and Apple had already forayed in those markets. The iPhone was simply a premium and unique device in that market, and thus able to fetch a high price. Fallacy #2: The iPad was not a monopoly. It was an entrance to a new market - particularly one that did not exist yet...tablets.
- paramaggarwal 15y agoYour analysis of my article is brilliant. Thanks a lot. I hadn't realized how flawed my analysis was.
- snikolic 15y agoSorry my post was sort of condescending/snarky. Your article was good food for thought.
- pohl 15y agoIn 2010, Apple launched the iPad. There was nothing like it in the market. It was an instant success. A monopoly in the true sense of the word. Translation: not at all a monopoly in any legally meaningful way. Horrible article.
- paramaggarwal 15y agoYou are right. I got the meaning of monopoly horribly wrong in my article.